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MNI POLICY: ECB Holds Rates, More QE, LTROs, Cheaper TLTROs

By Luke Heighton
     FRANKFURT (MNI) - The ECB kept key interest rates unchanged Thursday, but
announced a "comprehensive package" including EUR 120 billion more QE, cheaper
TLTRO-III terms and extra refinancing operations as it sought to offset the
effects of the coronavirus on the euro zone economy.
     Here are the key points from the decision:
     - TLTRO III will be offered at 25 basis points below the average rate
applied in the Eurosystem's main refinancing operations during the period from
June 2020 to June 2021. For counterparties that maintain their levels of credit
provision, the rate applied in these operations can be as low as 25 basis points
below the average interest rate on the deposit facility.
     - A "temporary envelope" of an additional net asset purchases of EUR120
billion will be added until the end of 2020, in combination with the existing
APP programme.
     - Additional temporary longer-term refinancing operations (LTROs) will be
carried out through a fixed rate tender procedure with full allotment, with an
interest rate that is equal to the average rate on the deposit facility. The
LTROs will provide liquidity at favourable terms to bridge the period until the
TLTRO III operation in June 2020.
     - The maximum total amount that counterparties will be entitled to borrow
in TLTRO III operations is raised to 50% of their stock of eligible loans as at
28 February 2019.
     - The Governing Council continues to expect net asset purchases to run for
as long as necessary to reinforce the accommodative impact of its policy rates,
and to end shortly before it starts raising the key ECB interest rates.
     - The interest rate on the main refinancing operations and the interest
rates on the marginal lending facility and the deposit facility will remain
unchanged at 0.00%, 0.25% and -0.50% respectively, and will remain at their
present or lower levels until the inflation outlook has robustly converged to a
level sufficiently close to, but below, 2% within the projection horizon, and
such convergence has been consistently reflected in underlying inflation
     - Reinvestments of the principal payments from maturing securities
purchased under the APP will continue, in full, for an extended period of time
past the date when the Governing Council starts raising the key ECB interest
rates, and in any case for as long as necessary to maintain favourable liquidity
conditions and an ample degree of monetary accommodation.
--MNI Frankfurt Bureau; +49-69-720-146; email:
--MNI London Bureau; +44 203 865 3829; email:
[TOPICS: M$X$$$,M$$EC$]

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